AMR, Southwest Meetings Show Sharp Contrast
FORT WORTH, Texas (AP)--American Airlines' unionized employees packed a shareholders meeting Wednesday to complain that company leaders aren't bearing their share of cost-cutting and have failed to determine how to increase revenue.
One pilot complained that management's plan to turn around the world's biggest carrier is a feel-good approach that lacks strategy and vision.
American's parent, AMR Corp.(NYSE:AMR) (AMR), has lost more than $6 billion over the past three years, but is no longer in immediate danger of bankruptcy. It lost $ 166 million in the first quarter, but made money in March, and company directors rewarded Chief Executive Gerard Arpey by giving him the added title of chairman on Wednesday. The mood of shareholders was somber but hopeful.
Edward Brennan, who had been chairman since last spring, will remain on AMR's board.
Two hours later and 20 miles east, shareholders of Southwest Airlines Co.(NYSE:LUV) ( LUV) gathered and cheered executives of the low-cost carrier, which has remained profitable through the industry's deep slump.
Dallas-based Southwest plans to add 58 planes by the end of next year, and its new service in Philadelphia is off to a rousing start.
"I believe Southwest Airlines to be in superb competitive position," Chief Executive James F. Parker declared.
The contrast in fortunes at the two airlines was evident during the meetings, but there were also common themes.
One was fuel prices, which have nearly eliminated any chance that traditional airlines such as American might earn a profit for 2004.
Late Tuesday, Houston-based Continental Airlines Inc.(NYSE:CAL) (CAL) raised fares by up to $40 per round trip and said soaring fuel prices could force it to cut jobs and wages.
American certainly will match the increase, Chairman and Chief Executive Gerard Arpey told reporters after AMR's meeting.
At Southwest, Parker said higher fuel costs might prompt the Dallas carrier to raise fares $1 to $2 each way on some routes.
Southwest is largely insulated from the spike in fuel prices because it purchased options to buy about 80% of its fuel at roughly 60% of the current price. American, which hovered near bankruptcy at this time last year, couldn't afford to make such long-term bets on the direction of fuel prices.
American and Southwest share a concern with maintaining decent relations with labor unions. Under threat of bankruptcy, American persuaded its unions to approve major cuts in pay and benefits last year, which are still being felt.
Dozens of members of the Transport Workers Union attended the AMR meeting wearing black T-shirts that bore a message to management - "Show Me the Shared Sacrifice!" TWU represents mechanics and other ground workers.
Arpey took a pay cut and received no bonuses last year. The same went for other top executives. TWU members, however, complained that Arpey got a $151,000 payment under a long-term incentive program.
Dave Eitel, a San Francisco-based pilot active in the pilots' union, said that American had failed to develop a strategy to increase revenue and compete with other carriers. He said American and AMR prospered only when the entire airline industry did.
The pilot called Arpey's four-point turnaround program for American a feel- good plan.
Arpey didn't respond directly to Eitel's charge, but later told reporters that he sympathized with employees' view "that if we just raised revenue a lot we could fix our problem."
That is not so easy, he said.
"This remains a very difficult operating environment," Arpey said. "That's why United is bankrupt, US Airways (was) bankrupt, Air Canada is bankrupt, Hawaiian is bankrupt. There's a reason that those things have occurred."
American is boosting capacity by 6% this year, with most of the increase on more profitable international routes, which should help.
American, however, has been unable to raise domestic fares much due to competition from low-cost carriers on nearly 90% of its U.S. routes. As a result, American's "yield" - the amount it makes per passenger - is not rising much.
Southwest has been unable to reach a contract settlement with its flight attendants' union. Flight attendants told reporters Wednesday that the carrier is healthy enough to give them good pay raises. Company officials declined to discuss the issue.
.....and a good time was had by all!
NASDAQ - FULL STORY LINK - DOW JONES
FORT WORTH, Texas (AP)--American Airlines' unionized employees packed a shareholders meeting Wednesday to complain that company leaders aren't bearing their share of cost-cutting and have failed to determine how to increase revenue.
One pilot complained that management's plan to turn around the world's biggest carrier is a feel-good approach that lacks strategy and vision.
American's parent, AMR Corp.(NYSE:AMR) (AMR), has lost more than $6 billion over the past three years, but is no longer in immediate danger of bankruptcy. It lost $ 166 million in the first quarter, but made money in March, and company directors rewarded Chief Executive Gerard Arpey by giving him the added title of chairman on Wednesday. The mood of shareholders was somber but hopeful.
Edward Brennan, who had been chairman since last spring, will remain on AMR's board.
Two hours later and 20 miles east, shareholders of Southwest Airlines Co.(NYSE:LUV) ( LUV) gathered and cheered executives of the low-cost carrier, which has remained profitable through the industry's deep slump.
Dallas-based Southwest plans to add 58 planes by the end of next year, and its new service in Philadelphia is off to a rousing start.
"I believe Southwest Airlines to be in superb competitive position," Chief Executive James F. Parker declared.
The contrast in fortunes at the two airlines was evident during the meetings, but there were also common themes.
One was fuel prices, which have nearly eliminated any chance that traditional airlines such as American might earn a profit for 2004.
Late Tuesday, Houston-based Continental Airlines Inc.(NYSE:CAL) (CAL) raised fares by up to $40 per round trip and said soaring fuel prices could force it to cut jobs and wages.
American certainly will match the increase, Chairman and Chief Executive Gerard Arpey told reporters after AMR's meeting.
At Southwest, Parker said higher fuel costs might prompt the Dallas carrier to raise fares $1 to $2 each way on some routes.
Southwest is largely insulated from the spike in fuel prices because it purchased options to buy about 80% of its fuel at roughly 60% of the current price. American, which hovered near bankruptcy at this time last year, couldn't afford to make such long-term bets on the direction of fuel prices.
American and Southwest share a concern with maintaining decent relations with labor unions. Under threat of bankruptcy, American persuaded its unions to approve major cuts in pay and benefits last year, which are still being felt.
Dozens of members of the Transport Workers Union attended the AMR meeting wearing black T-shirts that bore a message to management - "Show Me the Shared Sacrifice!" TWU represents mechanics and other ground workers.
Arpey took a pay cut and received no bonuses last year. The same went for other top executives. TWU members, however, complained that Arpey got a $151,000 payment under a long-term incentive program.
Dave Eitel, a San Francisco-based pilot active in the pilots' union, said that American had failed to develop a strategy to increase revenue and compete with other carriers. He said American and AMR prospered only when the entire airline industry did.
The pilot called Arpey's four-point turnaround program for American a feel- good plan.
Arpey didn't respond directly to Eitel's charge, but later told reporters that he sympathized with employees' view "that if we just raised revenue a lot we could fix our problem."
That is not so easy, he said.
"This remains a very difficult operating environment," Arpey said. "That's why United is bankrupt, US Airways (was) bankrupt, Air Canada is bankrupt, Hawaiian is bankrupt. There's a reason that those things have occurred."
American is boosting capacity by 6% this year, with most of the increase on more profitable international routes, which should help.
American, however, has been unable to raise domestic fares much due to competition from low-cost carriers on nearly 90% of its U.S. routes. As a result, American's "yield" - the amount it makes per passenger - is not rising much.
Southwest has been unable to reach a contract settlement with its flight attendants' union. Flight attendants told reporters Wednesday that the carrier is healthy enough to give them good pay raises. Company officials declined to discuss the issue.
.....and a good time was had by all!
NASDAQ - FULL STORY LINK - DOW JONES
